"In the first quarter, Fortinet delivered billings and revenue growth that exceeded our guidance and continued to outgrow the market," said Ken Xie, founder, chairman and chief executive officer. "The Fortinet Security Fabric is gaining significant traction with customers as demonstrated by the strength in large, multi-product deals and our continued expansion into the largest enterprises around the world."

Revenue: Total revenue was $340.6 million for the first quarter of 2017, an increase of 20%
compared to $284.6 million in the same quarter of 2016. Within total revenue, product revenue was $135.3 million, an increase of 9% compared to $124.6 million in the same quarter of 2016. Service revenue was $205.3 million, an increase of 28% compared to $160.0 million in the same quarter of 2016.

Billings1: Total billings were $403.3 million for the first quarter of 2017, an increase of 22% compared to $330.5 million in the same quarter of 2016.

Deferred Revenue: Total deferred revenue was $1.10 billion as of March 31, 2017, an increase of 31% compared to $837.2 million as of March 31, 2016. Total deferred revenue increased by $62.7
million compared to $1.04 billion as of December 31, 2016.

Cash and Cash Flow: As of March 31, 2017, cash, cash equivalents and investments were $1.44 billion, compared to $1.31 billion as of December 31, 2016. In the first quarter of 2017, cash flow from operations was $129.7 million compared to $100.6 million in the same quarter of 2016. Free cash flow1 was $116.2 million during the first quarter of 2017 compared to $70.6 million in the same quarter of 2016, an increase of 65%.

GAAP Operating Income or Loss: GAAP operating income was $5.4 million for the first quarter of 2017, representing a GAAP operating margin of 2%. GAAP operating loss
was $3.7 million for the same quarter of 2016, representing a GAAP operating margin of -1%.

Non-GAAP Operating Income1: Non-GAAP operating income was $43.0 million for the first quarter of 2017, representing a non-GAAP operating margin of 13%. Non-GAAP operating income was $30.1 million for the same quarter of 2016, representing a non-GAAP operating margin of 11%.

GAAP Net Income and Diluted Net Income Per Share: GAAP net income was $10.7 million for the first quarter of 2017, compared to GAAP net income of $2.1 million for the same quarter of 2016. GAAP diluted net income per share was $0.06 for the first quarter of 2017, compared to $0.01 for the same quarter of 2016.

Non-GAAP Net
Income and Diluted Net Income Per Share1: Non-GAAP net income was $31.0 million for the first quarter of 2017, compared to non-GAAP net income of $20.1 million for the same quarter of 2016. Non-GAAP diluted net income per share was $0.17 for the first quarter of 2017, compared to $0.12 for the same quarter of 2016.

1 A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

Conference Call DetailsFortinet will host a conference call
today, April 27, 2017, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its financial results. To access this call, dial (877) 303-6913 (domestic) or (224) 357-2188 (international) with conference ID # 93617593. A live webcast of the conference call and supplemental slides will be accessible from the Investor Relations page of Fortinet's website at http://investor.fortinet.com and a replay will be archived and accessible at http://investor.fortinet.com/events.cfm. A replay of this conference call can also be accessed through May 4, 2017, by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID# 93617593.

Following Fortinet's financial results conference call, the Company will host an additional question-and-answer session at 3:30 p.m. Pacific Time (6:30 p.m. Eastern Time) to provide an opportunity for financial analysts and investors to ask more detailed questions. To access this call, dial (877) 303-6913 (domestic) or (224) 357-2188
(international) with conference ID # 93622812. This follow-up call will be webcast live and accessible at http://investor.fortinet.com, and a replay will be archived and available after the call at http://investor.fortinet.com/events.cfm. A replay of this conference call will also be available through May 4, 2017 by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID # 93622812.

Fortinet (NASDAQ:FTNT) secures the largest enterprise, service provider and government organizations around the world. Fortinet empowers its customers with intelligent, seamless protection across the expanding attack surface and the power to take on ever-increasing performance requirements of the borderless network -- today and into the future. Only the Fortinet Security Fabric architecture can deliver security without
compromise to address the most critical security challenges, whether in networked, application, cloud or mobile environments. More than 310,000 customers worldwide trust Fortinet to protect their businesses. Learn more at http://www.fortinet.com, the Fortinet Blog, or FortiGuard Labs.

Forward-looking StatementsThis press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding our positioning for future growth. Although we attempt to be accurate in making forward-looking statements, it is possible that future circumstances might differ from the assumptions on which
such statements are based. Important factors that could cause results to differ materially from the statements herein include the following: general economic risks; global economic conditions; regional and country-specific economic challenges and conditions and foreign currency risks; increasing competitiveness in the security market; the dynamic nature of the security market; specific economic risks worldwide and in different geographies, and among different customer segments; uncertainty regarding increased business and renewals from existing customers; uncertainties around continued success in sales growth and market share gains; longer sales cycles, particularly for larger enterprise customers; failure to convert sales pipeline into final sales; risks associated with successful implementation of multiple integrated software products and other product functionality risks; sales and
marketing execution risks; execution risks around new product development and introductions and innovation; risks of slowing growth in the security market in general; litigation, disputes and investigations and the potential cost, distraction and damage to sales and reputation caused thereby; market acceptance of new products and services; the ability to attract and retain personnel; changes in strategy; risks associated with management of growth; lengthy sales and implementation cycles, particularly in larger organizations; technological changes that make our products and services less competitive; risks associated with the adoption of, and demand for, our products and services in general and by specific customer segments; pricing pressure; risks related to integrating acquisitions; and the other risk factors set forth from time to time in our most recent Annual Report on Form 10-K, our
most recent Quarterly Report on Form 10-Q and our other filings with the SEC, copies of which are available free of charge at the SEC's website at www.sec.gov or upon request from our investor relations department. All forward-looking statements herein reflect our opinions only as of the date of this release, and we undertake no obligation, and expressly disclaim any obligation, to update forward-looking statements herein in light of new information or future events.

Non-GAAP Financial Measures

We have provided in this release financial information that has not been prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP financial and
liquidity measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with peer companies, many of which present similar non-GAAP financial measures to investors.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these
non-GAAP financial measures to their most directly comparable GAAP financial measures provided in the financial statement tables below.

Billings (Non-GAAP). We define billings as revenue recognized in accordance with GAAP plus the change in deferred revenue from the beginning to the end of the period less any deferred revenue balances acquired from business combination(s) during the period. We consider billings to be a useful metric for management and investors because billings drive future revenue, which is an important indicator of the health and viability of our business. There are a number of limitations related to the use of billings instead of GAAP revenue. First, billings include amounts that have not yet been recognized as revenue and are impacted by the term of security and support agreements. Second, we may calculate billings in a manner that is different from
peer companies that report similar financial measures. Management accounts for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with GAAP revenue.

Free cash flow (Non-GAAP). We define free cash flow as net cash provided by operating activities minus capital expenditures such as purchases of real estate and other property and equipment. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after capital expenditures, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, repurchasing outstanding common stock, and strengthening the balance sheet. Analysis of free cash flow facilitates management's comparison of our operating results to those of
our peer companies. A limitation of using free cash flow rather than the GAAP measure of net cash provided by operating activities as a means for evaluating liquidity is that free cash flow does not represent the total increase or decrease in the cash, cash equivalents and investments balance for the period because it excludes cash provided by or used for other investing and financing activities. Management accounts for this limitation by providing information about our capital expenditures and other investing and financing activities on the face of the cash flow statement and under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K.

Non-GAAP operating income and operating margin. We define non-GAAP operating
income as operating income or loss plus stock-based compensation, business acquisition-related charges, purchase accounting adjustments, impairment and amortization of acquired intangible assets, restructuring charges, expenses associated with the implementation of a new Enterprise Resource Planning (ERP) system, litigation settlement expenses and, when applicable, other significant non-recurring items in a given quarter. Non-GAAP operating margin is defined as non-GAAP operating income divided by GAAP revenue. We consider these non-GAAP financial measures to be useful metrics for management and investors because they exclude the items noted above so that our management and investors can compare our recurring core business operating results over multiple periods. There are a number of limitations related to the use of non-GAAP operating income instead of operating income or loss
calculated in accordance with GAAP. First, non-GAAP operating income excludes the items noted above. Second, the components of the costs that we exclude from our calculation of non-GAAP operating income may differ from the components that peer companies exclude when they report their non-GAAP results of operations. Management accounts for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating income and evaluating non-GAAP operating income together with operating income calculated in accordance with GAAP.

Non-GAAP net income and diluted net income per share. We define non-GAAP net income as net income plus the items noted above under non-GAAP operating income and operating margin, including a tax adjustment to achieve our effective tax rate on a non-GAAP basis, which often differs from the GAAP effective tax rate.
We define non-GAAP diluted net income per share as non-GAAP net income divided by the non-GAAP diluted weighted-average shares outstanding. We consider these non-GAAP financial measures to be useful metrics for management and investors for the same reasons that we use non-GAAP operating income and non-GAAP operating margin. However, in order to provide a more complete picture of our recurring core business operating results, we include in non-GAAP net income and non-GAAP diluted net income per share, the tax adjustment required resulting in an effective tax rate on a non-GAAP basis, which often differs from the GAAP tax rate. We believe the non-GAAP effective tax rates we use are reasonable estimates of normalized tax rates for our current and prior fiscal years under our global operating structure. The same limitations described above regarding our use of non-GAAP operating income and
non-GAAP operating margin apply to our use of non-GAAP net income and non-GAAP diluted net income per share. We account for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP diluted net income per share and evaluating non-GAAP net income and non-GAAP diluted net income per share together with net income and diluted net income per share calculated in accordance with GAAP.

FORTINET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

March 31, 2017

December 31,
2016

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

823,249

$

709,003

Short-term investments

375,423

376,522

Accounts receivable—net

270,111

312,998

Inventory

104,978

106,887

Prepaid expenses and other current assets

42,321

33,306

Total current assets

1,616,082

1,538,716

LONG-TERM INVESTMENTS

242,333

224,983

DEFERRED TAX ASSETS

199,186

182,745

PROPERTY AND EQUIPMENT—NET

155,476

137,249

OTHER INTANGIBLE ASSETS—NET

22,535

24,828

GOODWILL

14,553

14,553

OTHER ASSETS

17,218

16,867

TOTAL ASSETS

$

2,267,383

$

2,139,941

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

$

48,689

$

56,732

Accrued liabilities

43,449

35,640

Accrued payroll and compensation

73,204

78,138

Income taxes payable

14,129

13,588

Deferred revenue

677,114

645,342

Total current liabilities

856,585

829,440

DEFERRED REVENUE

420,937

390,007

INCOME TAX LIABILITIES

72,993

68,551

OTHER LIABILITIES

18,619

14,262

Total liabilities

1,369,134

1,302,260

STOCKHOLDERS' EQUITY:

Common stock

175

173

Additional paid-in capital

850,226

800,653

Accumulated other comprehensive loss

(489

)

(765

)

Retained earnings

48,337

37,620

Total stockholders' equity

898,249

837,681

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

2,267,383

$

2,139,941

FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

Three Months Ended

March 31, 2017

March 31, 2016

REVENUE:

Product

$

135,253

$

124,572

Service

205,323

160,004

Total revenue

340,576

284,576

COST OF REVENUE:

Product 1

55,297

49,313

Service 1

35,267

28,331

Total cost of revenue

90,564

77,644

GROSS PROFIT:

Product

79,956

75,259

Service

170,056

131,673

Total gross profit

250,012

206,932

OPERATING EXPENSES:

Research and development 1

51,195

44,754

Sales and marketing 1

170,400

146,103

General and administrative 1

22,577

19,439

Restructuring charges

430

328

Total operating expenses

244,602

210,624

OPERATING INCOME (LOSS)

5,410

(3,692

)

INTEREST INCOME

2,392

1,746

OTHER INCOME (EXPENSE)—NET

302

(1,312

)

INCOME (LOSS) BEFORE INCOME TAXES

8,104

(3,258

)

BENEFIT FROM INCOME TAXES

(2,613

)

(5,376

)

NET INCOME

$

10,717

$

2,118

Net income per share:

Basic

$

0.06

$

0.01

Diluted

$

0.06

$

0.01

Weighted-average shares outstanding:

Basic

174,489

171,745

Diluted

178,278

174,421

1 Includes stock-based compensation as follows:

Cost of
product revenue

$

342

$

280

Cost of service revenue

2,310

2,134

Research and development

7,898

7,143

Sales and marketing

19,026

15,815

General and administrative

3,755

3,530

$

33,331

$

28,902

FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in thousands)

Three Months Ended

March 31, 2017

March 31, 2016

Net
income

$

10,717

$

2,118

Other comprehensive income:

Change in unrealized loss on investments

425

1,888

Tax provision related to change in unrealized loss on investments

149

661

Other comprehensive income—net of taxes

276

1,227

Comprehensive income

$

10,993

$

3,345

FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Three Months Ended

March 31, 2017

March 31, 2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

10,717

$

2,118

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

13,493

10,550

Amortization of investment premiums

973

1,497

Stock-based compensation

33,331

28,902

Other non-cash items—net

1,469

(372

)

Changes in operating assets and liabilities:

Accounts receivable—net

42,437

38,920

Inventory

(3,545

)

(527

)

Deferred tax assets

(16,589

)

(16,709

)

Prepaid expenses and other current assets

(8,261

)

1,029

Other
assets

653

(911

)

Accounts payable

(8,287

)

(11,426

)

Accrued liabilities

2,923

300

Accrued payroll and compensation

(5,267

)

(2,945

)

Other liabilities

(1,057

)

(1,332

)

Deferred revenue

61,776

46,106

Income taxes payable

4,983

5,391

Net cash provided by operating activities

129,749

100,591

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of investments

(133,006

)

(115,672

)

Sales of investments

6,000

2,867

Maturities of investments

109,207

108,557

Purchases of property and equipment

(13,526

)

(29,956

)

Net cash used in investing activities

(31,325

)

(34,204

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock

29,515

17,785

Taxes paid related to net share settlement of equity awards

(13,693

)

(9,441

)

Repurchase and retirement of common stock

—

(50,000

)

Net cash provided by (used in) financing activities

15,822

(41,656

)

NET INCREASE IN CASH AND CASH EQUIVALENTS

114,246

24,731

CASH AND CASH EQUIVALENTS—Beginning of period

709,003

543,277

CASH AND CASH EQUIVALENTS—End of period

$

823,249

$

568,008

Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures(Unaudited, in thousands, except per share amounts)

Reconciliation of GAAP operating income or loss to Non-GAAP operating income, operating margin, net income and diluted net income per share

Three Months Ended March 31, 2017

Three Months Ended March 31, 2016

GAAPResults

Adjustments

Non-GAAPResults

GAAPResults

Adjustments

Non-GAAPResults

Operating income (loss)

$

5,410

$

37,553

(a)

$

42,963

$

(3,692

)

$

33,787

(b)

$

30,095

Operating margin

2

%

13

%

-1

%

11

%

Adjustments:

Stock-based compensation

33,331

28,902

Amortization of acquired intangible assets

2,292

1,178

Litigation settlement expenses

1,500

—

Restructuring charges

430

328

ERP-related expenses

—

2,986

Inventory fair value adjustment amortization

—

393

Tax adjustment

(17,223

)

(c)

(15,756

)

(c)

Net income

$

10,717

$

20,330

$

31,047

$

2,118

$

18,031

$

20,149

Diluted net income per share

$

0.06

$

0.17

$

0.01

$

0.12

Shares used in diluted net income per share calculations

178,278

178,278

174,421

174,421

(a) To exclude $33.3 million of stock-based compensation, $2.3 million of amortization of acquired intangible assets, $1.5 million litigation settlement expenses, and $0.4 million of restructuring charges in the three months ended March 31, 2017.(b) To exclude $28.9 million of stock-based
compensation, $1.2 million of amortization of acquired intangible assets, $3.0 million of ERP-related expenses, $0.4 million of inventory fair value adjustment amortization recorded pursuant to our business acquisition, and $0.3 million of restructuring charges in the three months ended March 31, 2016.(c) Non-GAAP financial information is adjusted to achieve an overall 32% percent and 33% percent effective tax rate in 2017 and 2016, respectively, on a non-GAAP basis, which differs from the GAAP effective tax rate.